Air Transport World

Competition, Swedish style. (Swedish domestic-airline industry)

The domestic-airline industry is working to match the changes sweeping the rest of Europe. Its newest carrier is right in the middle.

Stockholm-Understanding the changes that are taking place in the Swedish domestic-airline industry is a fairly simple matter-for anyone who has no problem with the theory of relativity or who easily understands the sociopolitical concepts of the Middle East.

Understanding the Swedish domestic airline industry used to be fairly simple. It was highly regulated, with routes awarded to individual carriers on 5-year bases, with competition allowed only on routes that produce more than 300,000 passengers. If a carrier served a route well, renewal was virtually automatic. Thus, domestic carriers had almost no competition from other airlines. Nor did they really have a chance to grow without buying routes from another carrier-or buying the other carrier.

Thus, larger carriers also could own all or portions of smaller ones without worrying about competing against themselves.

Now, the Swedish government has announced its plans to deregulate the industry, which means that carriers will be able to compete against each other, as well as their parent companies. And that's where it gets complicated. Who owns what with whom?

The Swedish portion of Scandinavian Airlines System (SAS) is owned by a company called AB Aerotransport-air transport company, or Swedish Airlines-also called ABA. This company is owned 50-50 by the government and Svensk intercontinental Luftrafik AB, or SILA, a consortium of businesses forming the Swedish intercontinental air-traffic company.

Until last September, SAS and ABA each owned 50% of Linjeflyg, Sweden's largest regional carrier. Linjeflyg, in turn, owned 75% of Swedair, Sweden's next-largest regional airline. ABA owned the other 25% of Swedair, as well as part of Scanair, a Swedish charter carrier.

SAS and Linjeflyg did not compete because of regulated routes. Nordid Linjeflyg and Swedair. With deregulation, however, all of them could become competitors on the domestic market. …

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